What can we expect to pay for food?

05Jun 2013

By Staff Writer

City Press recently reported that the cost of bread, meat, milk, cheese, vegetables, sugar and cooking oil has increased by 49% since 2008. Their comparison revealed that where consumers had to pay R189, 94 in January 2008 for these products, they now have to fork out R283, 09 for the same items this year.

Dr Azar Jammine, chief economist at Econometrix, said that the high electricity tariffs, which will be increased by to 8% in July, is one of the main contributors to rising inflation rates causing the surge in food prices.

He added that local suppliers who are not making money in the country sell their good overseas, which causes local prices to increase as well.

Economists have also predicted that consumers can expect inflation to increase to 9% by the end of the year which will also have an impact on food prices. But Jammine said this cannot be set in stone because no one can actually predict how the rand will perform by the end of the year.

“If the rand dips to R10 to the dollar by the end of the year inflation could go up to 9% but should it stay at around R9 to the dollar, inflation may increase to just over 6%,” said Jammine.

How much have prices really increased?

Regarding the reports of a 49% increase in food prices, Rudi Van Niekerk, investment advisor for Agri-vie Food and Agribusiness Investment, said you have to consider the yearly inflation rate to see the food price in perspective.

“If food prices increased by 49% over five years this would mean it increased by 8, 3% per year. Considering that inflation increased by 6, 4% it would show that there was only a 1, 6% annual difference in food price and the inflation rate,” said Van Niekerk.

He added that the prices of basic food like bread, meat, milk, cheese, fruit and vegetables is bound to go up as they are all dependent on the agriculture industry, that is under pressure at the moment.

“We need to keep in mind that food price increases are not only experienced by the consumer who has to pay more for the basics. It is a chain process that starts at the farm gates where the food is supplied,” said Van Niekerk.

The agriculture industry is also still reeling from the effect of labour unrest and wage increases which Van Niekerk said hit the industry hard.

The global impact

The world is also experiencing an increase in demand and a decrease in supply when it comes to food. This has also had an impact on prices overall and thanks to a decrease in fertile soil and water, Van Niekerk predicts prices will stay higher than the nominal inflation rate.

“It’s safe to say that for the foreseeable future, we are likely to be faced with even further increases in food prices,” said Van Niekerk.

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